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Early retirement in the extreme …

Jacob and I are really the bookends for early retirement: he says that he has retired on $6k per year (a budget of $500 p.m.), and I am retired on $250k per year (around $20k p.m.).

I know I’m happy, and I’m pretty sure that Jacob is happy, too.

Now, there are some non apples-for-apples comparisons, here:

– Jacob has a spouse who works; my spouse does not work but has thought about working

[AJC: one of the problems with being ‘rich’ is that it’s embarrassing to take a part-time admin. job that pays $13k per year, driving there in 10 years salary worth of car and driving home to 461 years worth of house! I told her that it might be better if she just donated her time to the charity that wanted to hire her]

– Jacob has no children; I have two

– Jacob’s net worth is higher than the typical American’s … so is mine!

Wealth is defined as being able to live comfortably on the passive proceeds of your investments; clearly, both Jacob and I can do that according to our individual assessments of ‘comfort’, so we are both wealthy.

Moreover, our wealth and retirement strategies are not for the masses … but, the lessons learned can be!

However – and, this is a big ‘however’ – I simply don’t believe that ‘extreme’ early retirement strategies really work for any, but a small minority of families. There will simply be too much financial pressure – some generated directly, and some indirectly (yes, peer pressure is real) from the children:

– Food: you may be happy eating home-cooked meals. Your kids will want sushi and sodas with their friends.

– Clothing: you may be happy with last-season Gap and TJ Maxx. Your kids will want this season Abercrombie and Ed Hardy.

– Education: you may be happy on $500 p.m., but how much college will that buy? Your kids will resent having to buy their own, so that you can do nothing.

– Health: your kids will be at the doctor every day … for everything from a runny nose to broken bones to removal of superfluous bits (foreskins, adenoids, tonsils, and appendix … and, that’s just in healthy children!). They won’t ask to go … every time they so much as sneeze, you’ll be dragging them there in a panic!

11 thoughts on “Early retirement in the extreme …”

I can understand the desire to have “less” (especially clutter) and not to waste money on “stuff” that serves no useful function and provides no happiness, but if BF and his family are happy living as described, then their idea of happy is very different from mine.

Of course, this is coming from someone who just lost the internal debate over whether or not to get an iPad……

“Bookends” is a good way to look at you and Jacob. I read both blogs and am shooting for something in between. I don’t think I need $250K/year, but neither can I live the life I want to live on $6K/year.
One way that helps in dealing with children (we have two) is to homeschool. That cuts down on a lot of the peer pressure that drives irrational expenses in the food and clothing area, and doctor visits as well. Also, being reasonable vs. paranoid about illnesses, cuts and scrapes, and removing otherwise healthy body parts is both healthier in the long run and cuts down on medical expense. Our children (9 and 12) get a yearly checkup from the doctor and dentist, and recommended vaccinations. Apart from that I can count on one hand the number of times they’ve had to go to the doctor.
College education is something that can be saved for just like retirement. We have 529 plans for each child, and won’t be retired until there’s either enough money in there to pay for a reasonable college education, or the kids are actually done with college.

I Like Jason’s Plan about the 529 plan for college, but I think maybe he ought to think about paying half his kids college, and allowing them to pay the other half so they learn to work for some things in life. This could help set them up for understanding how hard a person works for his money as well as the value of money its self.
Home schooling can help in certain areas as he has said, but it also takes them away from contact with children their own age. I think it can be important for them to be with others succeeding sometimes and failing sometimes. Developing that bond that kids develop. I don’t know as if I would want to have been home schooled my self. I had to walk a mile a day in snow up to my butt, never one to enjoy snow in the first place, but wouldn’t give that time up for anything,since I made many friends at school.

as for Jacob’s dad not buying any toys and such. I can understand not wanting to waste a lot of money on things the kids might only play with for a short time. But a better solution might have been ,dad and kids building a play house together and or a swing together. The bonding9between dad and kids ) would be great,and the kids would learn useful skill that might be used later in life.

I’m not authority on kids, since I don’t have any, but the consensus amongst my readers with kids is that they cost as much as you can afford because that’s about what most parents will spend.

In many cases it comes down to either outsourcing and spending the money or spending the time. Like the kids could be sent to summer camp for $3000 … or you could spend $300 building a cabin with them. Of course there are some things that only money can give, but there are also things only time can give.

A smart kid can get as much out of a college education as they can with a library card and few bucks in late fees. Granted, there aren’t that many smart kids, but then again, there are too many going to college these days just because it’s fashionable. I got a PhD but I wouldn’t assume that potential kids would be into book learning (a great majority of college students actually aren’t). If they were more hands-on an apprenticeship, where students are paid $15/hr rather than going $30000 into debt, would be better and as or more financially rewarding than college.

I do admit that being surrounded by bling may be harder to resist for a kid than an adult.

I wrote about this subject also. Jacob is a great dude but I hope my life to follow your way of life rather than his.

@Jason
I am not sure AJC wrote about the topic or not, but the 529 plan actually wouldn’t be a good call for someone like AJC.

529 Plans use your gifting dollars ($13,000/yr/donee) whereas paying for higher education is unlimited. So AJC would be able to reduce his taxable estate by gifting to another trust (Family Income or ILIT for example) while paying for school.